Tuesday, May 24, 2011

What happens when Greece defaults? And could this come to America?

Here is a little of what the article projects is coming soon in Greece:

What happens when Greece defaults. Here are a few things:- Every bank in Greece will instantly go insolvent.- The Greek government will nationalise every bank in Greece.- The Greek government will forbid withdrawals from Greek banks.- To prevent Greek depositors from rioting on the streets, Argentina-2002-style (when the Argentinian president had to flee by helicopter from the roof of the presidential palace to evade a mob of such depositors), the Greek government will declare a curfew, perhaps even general martial law.- Greece will redenominate all its debts into “New Drachmas” or whatever it calls the new currency (this is a classic ploy of countries defaulting)- The New Drachma will devalue by some 30-70 per cent (probably around 50 per cent, though perhaps more), effectively defaulting on 50 per cent or more of all Greek euro-denominated debts.

Now replace "Greece" with other countries (Ireland? Portugal? Spain? The US?) and you'll see why even the hedge fund managers are worried these days.